The average parent works hard to build wealth that he or she can later pass on to their children and grandchildren. Often, these working parents grow up in low income households or witness their own parents working hard to build up a comfortable living and support a family. Unfortunately, no matter how hard a parent tries to instill a respect for money and hard work in his or her children, the majority of a person’s wealth is lost by the next generation. Understanding how your children gamble with your life savings can give you a better idea of how important proper estate planning is to any adult who wants to successfully transfer wealth intergenerationally.
Security Blanket Syndrome
Once your children receive the savings that you spent your life accumulating, it becomes a financial security blanket that they did not earn and often do not fully appreciate. The average adult is forced to carefully think his or her way through every major financial decision because one misstep could mean complete and utter disaster. A person who is one missed paycheck away from homelessness is going to view finances differently than a peer who has enough money to pay a $60,000.00 out-of-state college tuition upfront in cash. The security of knowing that there is a large amount of money between him or her and financial ruin may reduce your child’s sense of responsibility or accountability.
It likely that your children, their friends, or their spouses will talk to other people about their inheritance. Eventually, one or more person who knows about the inheritance will ask your child to invest in a business venture with them, often expecting your child to cover their financial investment, as well. One investment will usually lead to another along with the money needed to maintain whatever property or business they have invested their money in. An inability to say no to the constant requests for loans or investment capital will quickly eat away at your children’s inheritance, leaving them with nothing if they are lucky and bankrupt if they are not.
Unwillingness to Ask for Help
Adults who have grown up with limited access to money rarely know the right way to keep inherited wealth while adding to it on their own. Studies have shown that when confronted with unexpected wealth, people who were previously poor or living paycheck to paycheck are uncomfortable with asking for help. When they do seek advice, they ask friends, acquaintances, or others who are not qualified to give financial advice. Financial planners, accountants, and attorneys are all able to help develop strategies to maintain wealth but your children may wait to go to professionals until it is too late.
Get Your Children the Help They Need
Part of being a parent is protecting your children from themselves. If you are planning to leave your children your life savings in your estate plan, it is a good idea to put a buffer between them and their inheritance. Creating a trust to be administered by a professional is the best way to ensure your child will not squander the money you spent your life acquiring. Our trust administration lawyer at MMZ Law understands how important it is that your children receive the financial advice and resources they need once you are gone. We will work with you to determine the best way for you to leave your children an inheritance while protecting them from costly money management mistakes. Contact our Claremont, California office today to schedule a FREE private consultation.
BROUGHT TO YOU BY:
MMZ LAW, A PROFESSIONAL CORPORATION
341 W. 1st St. Suite 100
Claremont, CA 91711
MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of Elder Law – Medi-Cal Planning Asset Protection, Trust & Estate, Special Needs, Conservatorship, Trust Administration, & Probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.
This information is educational information only and not legal advice.